After Mirae’s India-China consumption fund, DSP BlackRock is bringing a China fund
Mutual funds with investments in foreign stocks are in great fashion. A number of fund houses are planning to raise money domestically and invest in overseas securities. DSP BlackRock Mutual Fund aims to scale up its existing kitty of international funds. So while it has filed offer documents for three funds, it is planning to launch an entire suite of its global funds.
The fund house has sought approval from the Securities and Exchange Board of India (SEBI) to launch its DSP BlackRock New Energy Fund, DSP BlackRock Latin American Fund and DSP BlackRock World Agriculture Fund. And now the fund house may launch a China Fund.
DSP BlackRock China Fund will funnel money into BlackRock Global Funds China Fund (BGF-CF). The scheme may, at the discretion of the investment manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus.
Foreign funds can help us in diversifying our portfolio, but it is debatable whether actively managed funds of specific countries are worth it. It exposes our portfolio to some unusual risks. The investment theme is attractive on paper. After all, on a per-capita basis, China is still one of the poorest countries on the planet. The Chinese government's investment plans are grand. They include a 2 trillion yuan ($250 billion) splurge on railways, including several new subway lines in Shanghai, in the next five years, 25,000 km of expressways by 2015 and an additional 21 nuclear power stations by 2020.
All this may power economic growth, but whether it will power Chinese stocks and when is a question. Over the last 10 years, India's Sensex has gone up by 18% and Shanghai Composite is up just by 3%. Nobody can say that China is not booming, but its stock market is down in the dumps, unable to beat inflation. Maybe that is a good reason to bet on Chinese stocks!
The scheme will be benchmarked to MSCI EM China 10/40 index. The one-year return of BlackRock Global-China Fund is 16.52% and 12.39% since inception. The benchmark has given a one-year return of 12.97% and 8.41% since inception.
Another Future Group company, Pantaloon Industries, also bought 98 lakh shares for another Rs8 crore to prevent a further fall of the stock price on debut. But the Future Ventures share is still struggling well below its issue price
Future Ventures India Ltd, the investment company promoted by Future Group's Kishore Biyani, made its debut on the stock exchanges yesterday. On the first day of trading itself, the scrip underperformed and closed 17% below its issue price.
On the Bombay Stock Exchange (BSE), the share made its debut at Rs9.50, and after touching an intra-day low of Rs7.95, it closed at Rs8.30. Around 76 million shares were traded on the stock exchange.
There was panic among retail investors as the scrip underperformed on the opening day itself and this led to heavy selling of the company's shares. In the middle of this chaos, Pantaloon Retail, another company of the Future Group, purchased about 99.55 lakh shares of Future Ventures at Rs8.20.
Interestingly, Pantaloon itself hasn't shown any robust growth in the last quarter. So, given its own weak financials, this move by the company, to buy shares of Future Ventures, raises several doubts. Pantaloon Retail's net profit for the quarter ended 31 December 2010 stood at Rs19.91 crore, up just Rs2.33 crore from Rs17.58 crore in the preceding September 2010 quarter.
Further, Pantaloon Industries, yet another group company, also bought 98.25 lakh shares of Future Ventures yesterday at the price of Rs8.20. The promoters of the group company were prompted to buy Future Ventures shares after witnessing the heavy sell-off on the counter, and this helped the stock recover some upward momentum.
The Future Ventures stock followed the same trend on the National Stock Exchange (NSE) as well. On the NSE the share made its debut at Rs9. It touched an intra-day high of Rs9.65, but closed the day at Rs8.20. Around 174.75 million shares were traded during market hours.
A simple calculation would reveal that Pantaloon's decision to buy the Future Ventures shares cost it around Rs8.16 crore. This appears strange, for the company's net profit in the December 2010 quarter was just Rs19.91 crore. Analysts expect that the stock will slide further. This could see the company suffer losses.
Future Ventures raised Rs750 crore through the initial public offer of shares priced at Rs10 each. The issue was subscribed 1.5 times. The company's shares were mainly subscribed by high net worth individuals, while the quota for institutional and retail investors was under-subscribed.
Moneylife has reported earlier how the Future Ventures prospectus stated that it cannot compare the promise and performance of Galaxy Entertainment, the company it acquired, because it did not have the IPO records of Galaxy which are legal documents. Still, SEBI cleared the Future Ventures prospectus, unaware of this irony. (Read, 'Future Ventures says it does not have IPO documents of a listed company it acquired three years ago'.)
Meanwhile, in trading today, the Future Ventures stock rose to Rs8.60 from yesterday's close of Rs8.30 on the BSE. On the NSE, the stock closed at Rs8.60, up from its previous close of Rs8.20.
If the Nifty closes above 5,560, there could be gains all the way to 5,680. On the lower side, the support will be at 5,430
The Sensex opened today in the positive at 18,573, while the Nifty was at 5,547. However, the market moved sideways through the day with nothing major happening on the domestic from or internationally that would swing it either way. The indices slipped into the red for just about an hour in morning trade, during which period they touched intraday lows of 18,455 and 5,525. In the late afternoon session, the Sensex and the Nifty made highs at 18,622 and 5,575 respectively.
The Sensex closed 72 points up at 18,585 and the Nifty was 24 points up at 5,565. Looking ahead, it the Nifty closes above 5,560, there could be gains all the way to 5,680. On the lower side, the support will be at 5,430. The market is still in its sideways move, but the bearish picture has not faded.
The Sensex had 23 gainers and 7 losers. The major gainer was Hero Honda (3.31% up) followed by DLF (up 2.46%), Tata Motors (1.85% up), SBI (1.78% up), Reliance Infrastructure (rose 1.48%). Major losers were NTPC (down 1.86%), Tata Power (down 1.39%), ONGC (down 1.30%), Larsen & Toubro (down 0.98%).
The Nifty had 34 stocks which gained and 16 stocks that fell.
All the BSE sectoral indices, except for the BSE Consumer Goods Index, were in the positive. BSE Realty rose 1.40%. While the BSE Consumer Goods Index fell 0.03%, the other 11 sectoral indices gained between 0.04% and 1.01%.
The Wholesale Price Index (WPI) data for April is due on 16th May, whereas industrial output data for March is expected on Thursday. According to a poll conducted among economists of 15 leading organisations, the IIP (Index of Industrial Production) is forecast to grow at 3.5% in March.
The India Meteorological Department (IMD) has forecast that the southwest monsoon will be 98% (normal) of the long period average (LPA) with a model error of plus/minus 5%. It has indicated that there is a very low probability of a deficit in the rainfall (below 90% of LPA) or even excess (above 110% of LPA).
The State Bank of India’s announcement yesterday of a hike in its benchmark prime lending rate by 75 basis points to 9.25%, saw the stock gain 1.78%.
Tata Motors, the country’s largest automaker by revenue, has launched a passenger carrier, ‘Magic Iris’, and a micro truck, ‘Ace Zip’, with an aim to extend its share in the domestic light commercial vehicles market. The Tata Motors stock price rose 1.85%.
Globally, markets were looking for Chinese inflation data figures. China's inflation for April was 5.3%, slightly higher than expected, but lower than the 32-month high of 5.4% in March. But industrial output and loans growth eased much more than expected in April, suggesting slower activity in the world's second-biggest economy. Except for the Shanghai Composite, Hang Seng and Taiwan Weighted, all other Asian indices were in the positive, and rose in the range of 0.39% to 1.28%. The Asian indices which were in the negative slipped in the range of 0.03% to 0.23%. (The Shanghai Composite registered the maximum loss.)
On Tuesday, the US government cut its projection for world oil demand this year by the most in 10 months. India imports a majority of its crude oil requirements and high oil prices have raised concerns about the widening current account deficit. High oil prices raise concerns about a higher oil subsidy bill for the government and its negative impact on the fiscal position.